The Spain Fund
Annual Report
November 30, 1999
[GRAPHIC OMITTED]
<PAGE>
LETTER TO SHAREHOLDERS The Spain Fund
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January 28, 2000
Dear Shareholder:
This report contains investment results and market commentary for The Spain Fund
(the "Fund") for the annual reporting period ended November 30, 1999.
INVESTMENT RESULTS
The following table provides performance for your Fund and its benchmark, the
Madrid General Index, for the three-, six- and 12-month periods ended November
30, 1999. Your Fund has outperformed its benchmark index over the six- and
12-month periods as a result of its focus on companies demonstrating
above-average earnings growth, particularly in industries such as media,
technology and telecoms.
INVESTMENT RESULTS*
Periods ended November 30, 1999
Total Returns
3 months 6 months 12 months
-------- -------- ---------
The Spain Fund 3.99% 6.13% 4.87%
Madrid General
Index 4.13% 4.22% 0.36%
* The Fund's investment results are total returns for the period and are
based on the net asset value as of November 30, 1999. All fees and
expenses related to the operation of the Fund have been deducted. Returns
for the Fund include the reinvestment of any distributions paid during the
period. Past performance is no guarantee of future results.
The Madrid General Index comprises 116 stocks and represents slightly more
than 92% of total market capitalization (excluding foreign stocks). The
index is dominated by banks, utilities and communications companies, which
together account for 70% of the index capitalization. The index is
unmanaged and reflects no fees or expenses. An investor cannot invest
directly in an index.
MARKET COMMENTARY
The Spanish stock market has recently joined in the worldwide buying frenzy for
growth stocks. The performance of companies such as Amadeus Global Travel
Distribution S.A., Telefonica S.A., Sogecable, Terra Networks S.A. and Jazztel
Plc has been remarkable relative to the somewhat subdued returns seen elsewhere
in the market. This flood of buying interest has been predicated on the basis
that the world has entered a new paradigm where new technologies in Internet,
broadband access and wireless application protocol will transform the way people
do business. Your Fund has generally adhered to the attractiveness of these
types of companies and has benefited in both absolute and relative terms through
its exposure to these areas.
At this point in time, we see little reason to reduce our exposure despite the
dramatic price increases of recent weeks on the basis that these groups still
offer outstanding potential earnings growth well into the next millennium. The
appearance of many of these types of companies has transformed the Spanish stock
market. Previously, low-growth sectors such as banking and utilities had
dominated the industry mix of the Spanish stock market. A combination of new
listings and price appreciation has meant that the Spanish stock market has
taken on a far more dynamic profile over the last year and presents a large pool
of potential "winning" companies for investors. We believe this trend towards
equity financing by small growing companies represents a new development that
will be sustained over the longer term. In this regard, investors are now
presented with an opportunity that previously had not existed in Spain. The
growth of equity mutual funds has reflected the dramatic change in the
previously staid savings patterns of the Spanish population and has seen a new
wave of capital prepared to invest in the future through the stock market.
PORTFOLIO OUTLOOK
We continue to believe that the Spanish stock market offers high-growth
penetration into Europe. In our view, both gross domestic product and corporate
earnings growth are likely to be higher than the European averages going
forward. A combination of favorable demographics, benign government economic
policy and a wave of restructuring make a compelling case for the long-term
outperformance of Spanish equities. While inflation and government borrowing
remain low, we foresee the Spanish stock market not only benefiting from a
high-growth environment, but also presenting the opportunity for further
multiple expansion in the future. As a result, your Fund remains broadly and
fully invested and alert to new opportunities that appear in the Spanish stock
market.
1
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The Spain Fund
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We thank you for your continued interest in The Spain Fund and look forward to
reporting to you again on market activity and the Fund's investment results in
the future.
Sincerely,
/s/ Dave H. Williams
Dave H. Williams
Chairman and President
/s/ Mark H. Breedon
Mark H. Breedon
Senior Vice President
2
<PAGE>
TEN LARGEST HOLDINGS
November 30, 1999 The Spain Fund
================================================================================
- --------------------------------------------------------------------------------
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- --------------------------------------------------------------------------------
Telefonica, SA (Common and New Shares) $24,355,364 17.3%
- --------------------------------------------------------------------------------
Banco Bilbao Vizcaya, SA 14,071,732 10.0
- --------------------------------------------------------------------------------
Repsol-YPF, SA 11,506,541 8.2
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Banco Santander Central Hispano, SA 10,364,248 7.4
- --------------------------------------------------------------------------------
Amadeus Global Travel Distribution, SA 8,050,417 5.7
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Sogecable, SA 6,820,582 4.8
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Endesa, SA 6,421,016 4.5
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Corporacion Financiera Alba, SA 6,148,297 4.4
- --------------------------------------------------------------------------------
Acerinox, SA 5,762,207 4.1
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Union Electrica Fenosa, SA 4,428,816 3.1
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$97,929,220 69.5%
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3
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PORTFOLIO OF INVESTMENTS
November 30, 1999 The Spain Fund
================================================================================
Company Shares U.S. $ Value
- -------------------------------------------------------------
COMMON STOCKS &
OTHER INVESTMENTS-96.2%
UTILITIES-28.8%
ELECTRIC & GAS-9.4%
Endesa, SA.................. 324,012 $ 6,421,016
Gas Natural SDG, SA......... 96,000 2,407,520
Union Electrica Fenosa,
SA .................... 263,000 4,428,816
------------
13,257,352
------------
TELECOMMUNICATIONS-1.2%
Indra Sistemas, SA.......... 129,000 1,738,885
------------
TELEPHONE-17.3%
Telefonica, SA (a).......... 1,152,316 23,971,683
New Shares (a)........... 23,046 383,681
------------
24,355,364
------------
WATER-0.9%
Aguas De Barcelona, SA...... 82,000 1,256,291
New Shares............... 820 12,481
------------
1,268,772
------------
40,620,373
------------
FINANCIAL
SERVICES-26.1%
BANKING-21.7%
Banco Bilbao Vizcaya,
SA (b)................... 1,010,000 14,071,732
Banco Popular Espanol,
SA .................... 47,800 3,087,019
Banco Santander Central
Hispano, SA.............. 944,358 10,364,248
Bankinter, SA............... 85,000 3,065,381
------------
30,588,380
------------
REAL ESTATE-4.4%
Corporacion Financiera
Alba, SA................. 210,032 6,148,297
------------
36,736,677
------------
CONSUMER
SERVICES-20.9%
BROADCASTING &
COMMUNICATION-4.8%
Sogecable, SA (a)........... 216,000 6,820,582
------------
MISCELLANEOUS-5.7%
Amadeus Global Travel
Distribution, SA (a)..... 1,026,000 8,050,417
------------
PRINTING &
PUBLISHING-1.0%
Unidad Editorial, SA
Series A (a)(c).......... 687,039 1,382,254
------------
RESTAURANTS &
LODGING-1.5%
NH Hoteles, SA (a).......... 180,000 2,142,070
------------
RETAIL-7.9%
Aldeasa, SA................. 189,150 3,596,206
Centros Comerciales
Pryca, SA................ 250,000 4,318,040
Cortefeil, SA............... 141,200 3,224,311
------------
11,138,557
------------
29,533,880
------------
ENERGY-8.2%
OIL-8.2%
Repsol-YPF, SA.............. 527,119 11,506,541
------------
BASIC INDUSTRIES-4.1%
MINING AND METALS-4.1%
Acerinox, SA................ 187,500 5,762,207
------------
TECHNOLOGY-3.8%
COMPUTER
SOFTWARE-1.0%
Meta4 NV
(Netherlands) (a)........ 175,800 1,326,345
------------
INTERNET-2.8%
Terra Networks, SA (a)...... 116,000 3,991,972
------------
5,318,317
------------
CONSUMER
STAPLES-3.5%
FOOD-1.3%
Telepizza, SA (a)........... 398,320 1,827,146
------------
TOBACCO-2.2%
Tabacalera, SA
Series A................. 188,000 3,099,654
------------
4,926,800
------------
CONSUMER
MANUFACTURING-0.8%
BUILDING &
RELATED-0.8%
Grupo Dragados, SA.......... 120,000 1,098,497
------------
Total Common Stocks
and Other Investments
(cost $100,601,794)...... 135,503,292
------------
4
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The Spain Fund
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Principal
Amount
Company (000) U.S. $ Value
- -------------------------------------------------------------
TIME DEPOSIT-0.2%
Republic National Bank
New York
5.63%, 12/01/99
(cost $200,000)...... $200 $ 200,000
------------
TOTAL INVESTMENTS-96.4%
(cost $100,801,794).. $135,703,292
Other assets
less liabilities-3.6% 5,104,678
------------
NET ASSETS-100%......... $140,807,970
============
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(a) Non-income producing security.
(b) Security represents investment in an affiliate.
(c) Restricted and illiquid security, valued at fair value (see Notes A & E).
See notes to financial statements.
5
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STATEMENT OF ASSETS AND LIABILITIES
November 30, 1999 The Spain Fund
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ASSETS
Investments in securities, at value (cost $100,801,794) ..... $135,703,292
Cash ........................................................ 46,701
Foreign cash, at value (cost $5,370,986) .................... 5,286,782
Foreign taxes receivable .................................... 168,558
Interest receivable and other assets ........................ 149,265
Receivable for investment security sold ..................... 36,320
------------
Total assets ................................................ 141,390,918
------------
LIABILITIES
Management fee payable ...................................... 119,436
Accrued expenses ............................................ 463,512
------------
Total liabilities ........................................... 582,948
------------
NET ASSETS ..................................................... $140,807,970
============
COMPOSITION OF NET ASSETS
Capital stock, at par ....................................... $ 85,606
Additional paid-in capital .................................. 79,292,657
Accumulated net realized gain on investments
and foreign currency transactions .......................... 26,629,598
Net unrealized appreciation of investments
and foreign currency denominated assets and liabilities .... 34,800,109
------------
$140,807,970
============
NET ASSET VALUE PER SHARE (based on 8,560,621
shares outstanding) .......................................... $ 16.45
============
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See notes to financial statements.
6
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STATEMENT OF OPERATIONS
Year Ended November 30, 1999 The Spain Fund
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends - unaffiliated issuers (net of foreign taxes
withheld of $316,384) ............................................. $ 1,924,886
Dividends - affiliated issuer (net of foreign taxes
withheld of $41,337) .............................................. 234,245
Interest ............................................................ 63,572 $ 2,222,703
------------
EXPENSES
Management fee ...................................................... 1,474,232
Custodian ........................................................... 422,479
Audit and legal ..................................................... 411,010
Printing ............................................................ 137,793
Directors' fees and expenses ........................................ 127,298
Transfer agency ..................................................... 88,506
Registration ........................................................ 20,553
Miscellaneous ....................................................... 18,763
------------
Total expenses ...................................................... 2,700,634
------------
Net investment loss ................................................. (477,931)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions - unaffiliated issuers . 32,819,173
Net realized gain on investment transactions - affiliated issuer .... 6,712,601
Net realized loss on foreign currency transactions .................. (459,990)
Net change in unrealized appreciation of:
Investments ....................................................... (35,378,612)
Foreign currency denominated assets and liabilities ............... (139,010)
------------
Net gain on investments and foreign currency transactions ........... 3,554,162
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............................. $ 3,076,231
============
</TABLE>
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See notes to financial statements.
7
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STATEMENT OF CHANGES IN NET ASSETS The Spain Fund
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<TABLE>
<CAPTION>
Year Ended Year Ended
November 30, November 30,
1999 1998
============= =============
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income (loss) ..................................... $ (477,931) $ 326,494
Net realized gain on investments and foreign currency transactions 39,071,784 56,838,861
Net change in unrealized appreciation of investments and
foreign currency denominated assets and liabilities ............ (35,517,622) 16,842,699
------------- -------------
Net increase in net assets from operations ....................... 3,076,231 74,008,054
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................ -0- (4,446,478)
Distributions in excess of net investment income ................. -0- (14,822,505)
Net realized gain on investments and foreign currency transactions (53,691,993) (19,532,101)
CAPITAL STOCK TRANSACTIONS:
Net decrease ..................................................... (12,223,161) (15,416,922)
------------- -------------
Total increase (decrease) ........................................ (62,838,923) 19,790,048
NET ASSETS
Beginning of year ................................................ 203,646,893 183,856,845
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End of year ...................................................... $ 140,807,970 $ 203,646,893
============= =============
</TABLE>
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See notes to financial statements.
8
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NOTES TO FINANCIAL STATEMENTS
November 30, 1999 The Spain Fund
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NOTE A: Significant Accounting Policies
The Spain Fund, Inc. (the "Fund") was incorporated in the state of Maryland on
June 30, 1987 as a non-diversified, closed-end management investment company.
The financial statements have been prepared in conformity with generally
accepted accounting principles which require management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
1. Security Valuation
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are generally
valued at the last reported sales price or if no sale occurred, at the mean of
the closing bid and asked prices on that day. Readily marketable securities
traded in the over-the-counter market, securities listed on a foreign securities
exchange whose operations are similar to the U.S. over-the-counter market, and
securities listed on a national securities exchange whose primary market is
believed to be over-the-counter, are valued at the mean of the current bid and
asked prices. U.S. government and fixed income securities which mature in 60
days or less are valued at amortized cost, unless this method does not represent
fair value. Securities for which current market quotations are not readily
available are valued at their fair value as determined in good faith by, or in
accordance with procedures adopted by, the Board of Directors. Fixed income
securities may be valued on the basis of prices obtained from a pricing service
when such prices are believed to reflect the fair market value of such
securities.
2. Currency Translation
Assets and liabilities denominated in Euro are translated into U.S. dollars at
the mean of the quoted bid and asked price of the Euro against the U.S. dollar.
Purchases and sales of portfolio securities are translated at the rates of
exchange prevailing when such securities were acquired or sold. Income and
expenses are translated at rates of exchange prevailing when accrued. Net
realized gains and losses on foreign currency transactions represent net foreign
exchange gains and losses from holding of foreign currencies, currency gains or
losses realized between the trade and settlement dates on security transactions,
forward exchange currency contracts and the difference between the amounts of
dividends, interest and foreign taxes recorded on the Fund's books and the U.S.
dollar equivalent amounts actually received or paid. Net unrealized currency
gains and losses from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of net
unrealized appreciation of investments and foreign currency denominated assets
and liabilities.
The exchange rate for the Euro Dollar at November 30, 1999 was 1.006 EUR to U.S.
$1.00.
3. Taxes
It is the Fund's policy to meet the requirements of the U.S. Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to its
shareholders. Therefore, no provisions for federal income or excise taxes are
required. Withholding taxes on foreign interest and dividends have been provided
for in accordance with the Spanish tax rates.
4. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is
informed of the dividend. Interest income is accrued daily. Investment
transactions are accounted for on the date securities are purchased or sold.
Realized gains and losses from security and currency transactions are calculated
on the identified cost basis.
5. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gain distributions are determined in
accordance with tax regulations, which may differ from generally accepted
accounting principles. To the extent these differences are permanent, such
amounts are reclassified within the capital accounts based on their federal tax
treatment; temporary differences, do not require such reclassification. During
the current fiscal year, permanent differences, primarily due to foreign
currency losses, a net operating loss and a distribution reclass, resulted in
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) The Spain Fund
================================================================================
a net decrease in accumulated net realized gain on investment and foreign
currency transactions and a corresponding decrease in accumulated net investment
loss. This reclassification had no effect on net assets.
- --------------------------------------------------------------------------------
NOTE B: Management Fee and Other Transactions with Affiliates
Under an Investment Management and Administration Agreement, the Fund pays
Alliance Capital Management L.P. (the "Investment Manager") a fee, calculated
weekly and paid monthly, at an annualized rate of 1.10% of the average weekly
net assets up to $50 million, 1.00% of the Fund's average weekly net assets on
the next $50 million, and .90% of the Fund's average weekly net assets over $100
million.
The Fund and the Investment Manager have entered into a Sub-Advisory Agreement
with Privanza Banco Personal, S.A. (the "Sub-Adviser"). Under this agreement the
Sub-Adviser receives a fee at the annual rate of .25 of 1% of the Fund's average
weekly net assets. All amounts paid to the Sub-Adviser are payable by the
Investment Manager from its fee. An officer of the Fund is a director of the
Sub-Adviser.
Under the terms of a Shareholder Inquiry Agency Agreement with Alliance Fund
Services, Inc. ("AFS"), an affiliate of the Investment Manager, the Fund
reimburses AFS for costs relating to servicing phone inquiries for the Fund. The
Fund reimbursed AFS $410 during the year ended November 30, 1999.
Brokerage commissions paid on investment transactions for the year ended
November 30, 1999 amounted to $532,557, of which $1,491 was paid to Banco Bilbao
Vizcaya.
Banco Bilbao Vizcaya, an affiliate of the Sub-Adviser, serves as subcustodian of
the Fund. Fees paid to the subcustodian are payable by the custodian from its
fee. For the year ended November 30, 1999, the Fund earned $37,415 of interest
income on cash balances maintained at the subcustodian.
- --------------------------------------------------------------------------------
NOTE C: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $64,804,475 and $136,187,366,
respectively, for the year ended November 30, 1999. There were no purchases or
sales of U.S. government or government agency obligations for the year ended
November 30, 1999.
At November 30, 1999, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes.
Accordingly, gross unrealized appreciation of investments was $39,321,337 and
gross unrealized depreciation of investments was $4,419,839 resulting in net
unrealized appreciation of $34,901,498 (excluding foreign currency
transactions).
Forward Exchange Currency Contracts
The Fund enters into forward exchange currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings. A forward exchange currency contract is a commitment to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original contracts and the
closing of such contracts is included in net realized gains or losses on foreign
currency transactions. Fluctuations in the value of open forward exchange
currency contracts are recorded for financial reporting purposes as unrealized
gains or losses by the Fund. Risks may arise from the potential inability of the
counterparty to meet the terms of a contract and from unanticipated movements in
the value of a foreign currency relative to the U.S. dollar. At November 30,
1999, the Fund had no outstanding forward foreign exchange currency contracts.
10
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The Spain Fund
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NOTE D: Capital Stock
There are 100,000,000 shares of $.01 par value common stock authorized. At
November 30, 1999, 8,560,621 shares were outstanding. On November 2, 1998 the
Fund initiated a share repurchase program. For the period from November 2, 1998
to November 30, 1999, 1,466,125 shares were repurchased at a cost of $27,640,083
representing 14.6% of the 10,026,746 shares outstanding at November 2, 1998.
This includes $87,968 in commissions paid to PaineWebber Group Incorporated. The
average discount of market price to net asset value of shares repurchased over
the period of November 2, 1998 to November 30, 1999 was 12.44%.
- --------------------------------------------------------------------------------
NOTE E: Restricted Security
Date Acquired Cost
================ ================
Unidad Editorial, SA Series A........... 9/30/92 $871,944
The security shown above is restricted as to sale and has been valued at fair
value in accordance with the policy described in Note A.
The value of this security at November 30, 1999 was $1,382,254 representing 1.0%
of net assets.
- --------------------------------------------------------------------------------
NOTE F: Concentration of Risk
Investing in securities of foreign companies involves special risks which
include the possibility of future political and economic developments which
could adversely affect the value of such securities. Moreover, securities of
many foreign companies and their markets may be less liquid and their prices
more volatile than those of United States companies.
Investment in the Fund's shares requires consideration of certain factors that
are not typically associated with investments in U.S. equity securities such as
currency fluctuations, potential price volatility, lower liquidity and
concentration of the Spanish equities market and limitations on the
concentration of investment in the equity of securities of companies in certain
industry sectors. The possibility of political and economic instability of
government supervision and regulation of the market may further affect the
Fund's investments.
11
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FINANCIAL HIGHLIGHTS The Spain Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Year
<TABLE>
<CAPTION>
Year Ended November 30,
====================================================================================
1999 1998 1997 1996 1995
============ ============ ============ ============ ============
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ...... $ 22.16 $ 18.34 $ 13.41 $ 10.47 $ 9.96
------------ ------------ ------------ ------------ ------------
Income From Investment Operations
Net investment income (loss) ............ (.06)(a) .04(a) .06 .11 .09
Net realized and unrealized gain on
investments and foreign currency
transactions ......................... .44 7.41 5.03 2.86 .42
------------ ------------ ------------ ------------ ------------
Net increase in net asset value from
operations ........................... .38 7.45 5.09 2.97 .51
------------ ------------ ------------ ------------ ------------
Realized gain due to repurchase program . .19 .24 -0- -0- -0-
------------ ------------ ------------ ------------ ------------
Less: Dividends and Distributions
Dividends from net investment income .... -0- (.45) (.16) (.03) -0-
Distributions in excess of net investment
income ............................... -0- (1.47) -0- -0- -0-
Distributions from net realized gain on
investments and foreign currency
transactions ......................... (6.28) (1.95) -0- -0- -0-
------------ ------------ ------------ ------------ ------------
Total dividends and distributions ....... (6.28) (3.87) (.16) (.03) -0-
------------ ------------ ------------ ------------ ------------
Net asset value, end of year ............ $ 16.45 $ 22.16 $ 18.34 $ 13.41 $ 10.47
============ ============ ============ ============ ============
Market value, end of year ............... $ 14.50 $ 18.875 $ 15.875 $ 10.75 $ 8.625
============ ============ ============ ============ ============
Total Return
Total investment return based on (b):
Market value ......................... 8.53% 50.44% 49.59% 25.03% (5.48)%
Net asset value ...................... 4.87% 52.88% 38.54% 28.48% 5.12%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) . $ 140,808 $ 203,647 $ 183,857 $ 134,508 $ 105,011
Ratio of expenses to average net assets . 1.84% 1.44% 1.55% 1.73% 2.07%
Ratio of net investment income (loss) to
average net assets ................... (.32)% .16% .38% .93% .89%
Portfolio turnover rate ................. 45% 47% 45% 44% 38%
</TABLE>
- --------------------------------------------------------------------------------
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last
business day of each period reported. Dividends and distributions, if any,
are assumed for purposes of this calculation, to be reinvested at prices
obtained under the Fund's Dividend Reinvestment and Cash Purchase Plan.
Generally, total investment return based on net asset value will be higher
than total investment return based on market value in periods where there
is an increase in the discount or a decrease in the premium of the market
value to the net asset value from the beginning to the end of such years.
Conversely, total investment return based on net asset value will be lower
than total investment return based on market value in periods where there
is a decrease in the discount or an increase in the premium of the market
value to the net asset value from the beginning to the end of such years.
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS The Spain Fund
================================================================================
To the Shareholders and Board of Directors of
The Spain Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Spain Fund, Inc. (the "Fund")
at November 30, 1999, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at November 30, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
New York, New York
January 21, 2000
TAX INFORMATION (unaudited)
================================================================================
The Fund has elected to give the benefit to its shareholders of foreign taxes
that have been paid and/or withheld. For the year ended November 30, 1999, this
amounted to $357,721. Although the Fund has made the election required to make
this credit available, the amount of allowable tax credit is subject to
limitation under the Internal Revenue Code.
In order to meet certain requirements of the Internal Revenue Code we are
advising you that the Fund paid $51,541,086 of capital gain distributions during
the fiscal year ended November 30, 1999, which are subject to a maximum tax rate
of 20%.
Shareholders should not use the above information to prepare their tax returns.
The information necessary to complete your income tax returns will be included
with your Form 1099 DIV which will be sent to you separately in January 2000.
13
<PAGE>
ADDITIONAL INFORMATION (unaudited) The Spain Fund
================================================================================
Shareholders whose shares are registered in their own names may elect to be
participants in the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
pursuant to which dividends and capital gain distributions to shareholders will
be paid in or reinvested in additional shares of the Fund. State Street Bank and
Trust Company (the "Agent") will act as agent for participants under the Plan.
Shareholders whose shares are held in the name of a broker or nominee should
contact such broker or nominee to determine whether or how they may participate
in the Plan.
If the Board declares an income distribution or determines to make a capital
gain distribution payable either in shares or in cash, as holders of the Common
Stock may have elected, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in shares in Common Stock
of the Fund valued as follows:
(i) If the shares of Common Stock are trading at net asset value or at a
premium above net asset value at the time of valuation, the Fund will
issue new shares at the greater of net asset value or 95% of the then
current market price.
(ii) If the shares of Common Stock are trading at a discount from net
asset value at the time of valuation, the Agent will receive the dividend
or distribution in cash and apply it to the purchase of the Fund's shares
of Common Stock in the open market on the New York Stock Exchange or
elsewhere, for the participants' accounts. Such purchases will be made on
or shortly after the payment date for such dividend or distribution and in
no event more than 30 days after such date except where temporary
curtailment or suspension of purchase is necessary to comply with Federal
securities laws. If, before the Agent has completed its purchases, the
market price exceeds the net asset value of a share of Common Stock, the
average purchase price per share paid by the Agent may exceed the net
asset value of the Fund's shares of Common Stock, resulting in the
acquisition of fewer shares than if the dividend or distribution had been
paid in shares issued by the Fund.
The Agent will maintain all shareholders' accounts in the Plan and furnish
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Agent in non-certificate form in the name of the
participant, and each shareholder's proxy will include those shares purchased or
received pursuant to the Plan.
There will be no charges with respect to shares issued directly by the Fund to
satisfy the dividend reinvestment requirements. However, each participant will
pay a pro rata share of brokerage commissions incurred with respect to the
Agent's open market purchases of shares. In each case, the cost per share of
shares purchased for each shareholder's account will be the average cost,
including brokerage commissions, of any shares purchased in the open market plus
the cost of any shares issued by the Fund.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent to
written notice of the change sent to participants in the Plan at least 90 days
before the record date for such dividend or distribution. The Plan may also be
amended or terminated by the Agent on at least 90 days' written notice to
participants in the Plan. All correspondence concerning the Plan should be
directed to the Agent at State Street Bank and Trust Company, PO Box 8200,
Boston, Massachusetts 02266-8200.
Since the filing of the most recent amendment to the Fund's registration
statement with the Securities and Exchange Commission, there have been (i) no
material changes in the Fund's investment objectives or policies, (ii) no
changes to the Fund's charter or by-laws that would delay or prevent a change of
control of the Fund, (iii) no material changes in the principal risk factors
associated with investment in the Fund, and (iv) no change in the person
primarily responsible for the day-to-day management of the Fund's portfolio, who
is Mark H. Breedon, the Vice President of the Fund.
14
<PAGE>
The Spain Fund
================================================================================
Year 2000
With respect to the Year 2000 issue, the Fund has been advised by Alliance and
by its major service providers that there is no indication that they have had or
will experience significant system interruptions.
- --------------------------------------------------------------------------------
Supplemental Proxy Information (unaudited)
The Annual Meeting of Shareholders of The Spain Fund was held on September 15,
1999. The description of each proposal and number of shares are as follows:
<TABLE>
<CAPTION>
Shares Authority
Voted For Withheld
==============================================================================================================
<S> <C> <C> <C>
1. To elect directors: Class One Directors
(term expires 2002)
Angel Corcostegui 4,678,201 69,699
Ignacio Gomez-Acebo 4,675,265 72,636
Dr. Reba White Williams 4,678,417 69,483
<CAPTION>
Shares Shares Shares Broker
Voted For Voted Against Abstained Non-Votes
==============================================================================================================
<S> <C> <C> <C> <C>
2. To ratify the selection of
PricewaterhouseCoopers LLP
as the Fund's independent
accountants of the Fund's
fiscal year ending
November 30, 1999. 4,689,124 26,460 32,316 N/A
3. To approve a shareholder
proposal pursuant to the
Corporation's Charter to
convert the Corporation
to an open-end investment
company. 1,307,226 1,820,756 83,875 1,536,044
</TABLE>
15
<PAGE>
The Spain Fund
================================================================================
BOARD OF DIRECTORS
Dave H. Williams, Chairman and President
Angel Corcostegui (1)
H.R.H. Pilar de Borbon y Borbon (1)
Inmaculada de Habsburgo-Lorena (1)
Enrique L. Fevre
Ignacio Gomez-Acebo (1)
Francisco Gomez Roldan (1)
Juan Manuel Sainz de Vicuna (1)
Dr. Reba W. Williams
Carlos Delclaux Zulueta
OFFICERS
Norman S. Bergel, Vice President
Mark H. Breedon, Vice President
Russell Brody, Vice President
Cristina Fernandez-Alepuz, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Vincent S. Noto, Controller
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
LEGAL COUNSEL
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
DIVIDEND PAYING AGENT, TRANSFER AGENT AND REGISTRAR
State Street Bank & Trust
Company 225 Franklin Street
Boston, MA 02110
- --------------------------------------------------------------------------------
(1) Member of the Audit Committee
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time
to time shares of its common stock on the open market.
This report, including the financial statements therein is transmitted to
the shareholders of The Spain Fund for their information. This is not a
prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in this report.
16
<PAGE>
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<PAGE>
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<PAGE>
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<PAGE>
The Spain Fund
Summary of General Information
Investment Objective and Policies
The investment objective of the Fund is to seek long-term capital appreciation
through investment primarily in the equity securities of Spanish companies.
Shareholder Information
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transaction section of newspapers under the designation
SpainFd. The daily net asset value of the Fund's shares are available from the
Fund's Transfer Agent by calling 1-800-219-4218. The Fund also distributes its
daily net asset value to various financial publications or independent
organizations such as Lipper Analytical Services and Morningstar, Inc. The
Fund's NYSE trading symbol is "SNF". Weekly comparative net asset value (NAV)
and market price information about the Fund is published each Monday in The Wall
Street Journal, each Sunday in The New York Times and each Saturday in Barron's
and other newspapers in a table called "Closed End Funds".
Dividend Reinvestment and Cash Purchase Plan
A Dividend Reinvestment Plan is available to shareholders in the Fund, which
provides automatic reinvestment of dividends and capital gain distributions in
additional Fund shares. The Plan also allows you to make optional cash
investments in Fund shares through the Plan Agent. If you wish to participate in
the Plan and your shares are held in your name, simply complete and mail the
enrollment form in the brochure. If your shares are held in the name of your
brokerage firm, bank or other nominee, you should ask them whether or how you
can participate in the Plan.
For questions concerning shareholder account information, or if you would like a
brochure describing the Dividend Reinvestment Plan, please call State Street
Bank and Trust Company at 1-800-219-4218.
The Spain Fund
1345 Avenue of the Americas
New York, New York 10105
Alliance Capital [LOGO](R)
(R) These registered service marks used under license from the owner, Alliance
Capital Management L.P.
SPNAR1199
